Market Watch

Updated March 15, 1999 12:01 a.m. ET

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Prudent Market Decisions 4 Cortland Lane, Greenville, R.I. 02828 MARCH 8 ~ The DJIA has again gone to new highs, but it has been a very narrow advance. As we noted last month, the Dow is going through the second and final stage of forming a major top, which could continue for a few more weeks to a few more months. While the Dow stocks, large-caps and a few tech stocks will continue to pace the advance to higher highs, fewer and fewer stocks advancing will be the likely scenario. The insider sell/buy ratio is still in positive territory, but P/E ratios are very high. Our work, however, still shows that the DJIA could get into the 10,500-11,000 range using the record high P/E ratio achieved in 1998 with current estimated Dow earnings for 1999. While profits can still be achieved in this final topping process, high volatility and narrowness of the advance makes it a very high-risk scenario. Prudent investors should use periods of market strength to exit stocks that hit their price targets.

-CARL RUHLE

Bob Brinker's Marketimer P.O. Box 229, Irvington, N.Y. 10533 MARCH 6 ~ When we study the historical causes of a bear market, we are most interested in Federal Reserve monetary policy. The Fed responds to anticipated trends in inflation and must be monitored closely. We believe it has adopted a bias toward less monetary ease, as a result of the rapid 6.1% real GDP growth in the fourth quarter of 1998. However, we do not anticipate an imminent change in monetary policy. Alan Greenspan surely is happy with the anemic 1% rate of inflation reported for 1998 in the GDP price index. Any chance of additional easing moves by the Fed in 1999 will rest solely on evidence of economic weakness, which remains absent.

-ROBERT J. BRINKER

Argus Weekly Staff Report 61 Broadway, New York, N.Y. 10006 MARCH 8 ~ With economic growth accelerating at a robust 6.1% pace during the fourth quarter and indications from some recent Fedspeak, many market pundits are claiming the Fed will ''retract'' the November rate cut and raise rates. This has, in turn, led to an increase in bond yields to their highest level since early August 1998 (5.67%). While this has surprised most participants and observers of the bond markets, we cannot say we're all that surprised. In fact, we had called for a temporary sell-off because of the growing likelihood of a strong Japanese unloading prior to the end of their fiscal year of March 31. We believe there are many reasons behind spiking bond yields-and just as many reasons why we believe that the spike will be short-lived. . . We insist there is little chance the Fed will act by hiking the overnight funds rate. The Fed cannot raise rates with inflation nowhere to be found. That isn't to say that there won't be an adoption of an asymmetric bias towards tightening at the March 30 meeting of the FOMC. A tighter bias does not necessitate or even necessarily foreshadow a rate hike. There have been numerous occasions where the Fed has instituted an asymmetric bias and not acted. We also believe that the Fed will attempt to ''talk up'' a rate hike with Fed governors and regional bank presidents. This would allow the markets to raise rates for the Fed. This process has worked well for the Fed in the past.

-RICHARD YAMARONE

Lowry's New York Stock ExchangeMarket Trend Analysis 631 U.S. Highway One,North Palm Beach, Fla. 33408 MARCH 5 ~ After just two days of strong rally, in which the DJIA rose more than 450 points to a new all-time high, the question in the minds of most investors is whether this is a revitalized extension of the rally that began from the October '98 market low. After all, the last two months of diminishing Buying Power and increasing Selling Pressure have produced little more than sideways consolidation patterns in the major price indexes, perhaps setting the stage for renewed investor confidence. On the other hand, many bull markets over the past 66 years have ended with a final, very selective rally that pushed the DJIA to an all-time high, fueled by an ever-narrowing list of blue-chip issues, while the broad list of stocks languished or declined. Examples during the past 40 years would include July '57, January '60, November '61, January '73, April '81, January '84, July '90 and July '98.

-PAUL F. DESMOND

Al Frank's The Prudent Speculator P.O. Box 1438, Laguna Beach, Calif. 92652 MARCH 1 ~ The backup in 30-year Treasury-bond interest rates is putting a lot of short-term pressure on the stock market, along with the stronger-than-expected economy. We expect bond yields to moderate and stock prices to advance over the next few months. Big corrections in computer technology shares are overdone. We still anticipate a nicely positive year on average as the current downward trading range reverts to an uptrend.

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